You
One Maharia û Jv Thr.You One Eng.&
Construction Co.Ltd. & Anr Vs. National Highways Authority of India [2007] Insc 851 (21 August 2007)
C.K.
Thakker C.K. Thakker, J.
This
petition is filed by the petitioners under Section 11(6) and Section 11(12) of
the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the
Act) read with paragraph 2 of the Appointment of Arbitrators by the Chief
Justice of India Scheme, 1996 for appointment of Third/Presiding Arbitrator in
accordance with the Agreement/Contract Package No. NS-23/AP dated May 31, 2001 entered into between the
petitioners and the respondent.
The
petitioners are a Joint Venture who came together by virtue of Joint
Venture Agreement dated May
10, 2001 for execution
of certain contracts for National Highways Authority of India (NHAI
for short). Petitioner No.1 is a Company registered under the Laws of the
Republic of Korea having its registered office at 75-95, Seosomoon Dong, Chung
Ku, Seoul, Korea 100 110.
Originally
it was known as YOU ONE Engineering and Construction Co. Ltd. at the time of
Joint Venture Agreement and also at the time of contract dated May 31, 2001 with NHAI. The Company has since
merged with and known as Ultra Construction and Engineering Co. Ltd., Seoul, Korea; i.e. in a country other than India within the meaning of Section 2(f)(ii)
of the Act. Petitioner No.2 is a Private Limited Company incorporated and
registered under the Companies Act, 1956 having its registered office at A-10, Panchvati,
Azadpur, Delhi 110 033.
According
to the petitioners, they entered into an Agreement on May 31, 2001 with the respondent for execution
of Contract Package No. NS-23/AP being a project for 4-Laning of KM. 464.000 to
KM. 474.000 of Nagpur-Hyderabad section and KM. 9.400 and KM. 22.300 of
Hyderabad-Bangalore section of National Highway 7 in the State of Andhra
Pradesh at a contract price of Rs.74,88,79,544.69. The Agreement contains an
arbitration clause which I will refer to at an appropriate stage.
According
to the petitioners, in September, 2004, i.e. after more than three years of
Contract-Agreement, it was alleged by the respondent that the petitioners had
furnished forged Bank Guarantees for availing mobilization and other advances
under the Contract Agreement. The respondent, in view of the Arbitration
Clause, filed OMP No. 342 of 2004 in the High Court of Delhi against the
petitioners under Section 9 of the Act for interim relief. The High Court
passed interim directions restraining the petitioners from removing and/or
transferring machinery and stock placed by them at the site for execution of
work. On December 13,
2004, the respondent
invoked Clause 59 of the Agreement and terminated the contract. There was
exchange of letters and notices between the parties. Ultimately, by a
communication dated April
7, 2005, the
petitioners intimated the respondent that in accordance with the Arbitration
Clause, they had appointed Honble Mr. Justice A.K. Srivastava, a retired
Judge of the High Court of Delhi as their nominee Arbitrator. According to the
petitioners, in the second half of June, the respondent addressed a letter to
Mr. C.S. Balaramamurthi, purported to have been written on April 7, 2005 appointing him as the nominee
Arbitrator of NHAI. From the record, it appears that the two Arbitrators could
not agree to an appointment of Third Arbitrator. The respondent intended to
appoint a technical man as the Third Arbitrator as the matter was of
a highly technical nature, but the arbitrator appointed by the petitioners
insisted that the Presiding Arbitrator should be a retired Chief Justice or a
Judge of a High Court, who should be senior to him (Justice Srivastava). It is
also on record that the respondent appointed Mr. K.P. Mohanty as the Presiding
Arbitrator. Subsequently, however, his appointment was not continued. In
February, 2006, Justice Srivastava had shown his unwillingness to continue as
Arbitrator and the petitioners nominated Honble Mr. Justice V.A. Mohta,
retired Chief Justice of High Court of Orissa as their nominee Arbitrator in
place of Justice Srivastava. Since the parties could not agree as to
appointment of Third/Presiding Arbitrator, the petitioners have filed the
present petition praying therein that the Chief Justice of India may be pleased
to appoint a retired Judge of the Supreme Court of India or a retired Chief
Justice of a High Court as Presiding Arbitrator. The Honble Chief Justice
of India designated me to deal with the matter and to pass an appropriate order
on the application. Accordingly the petition was placed before me.
On January 24, 2007 notice was issued. Affidavits and
further affidavits had been filed by the parties.
I have
heard learned counsel on both the sides.
The
learned counsel for the petitioners submitted that the respondent-NHAI ought to
have agreed to appoint a retired Judge of the Supreme Court or a retired Chief
Justice of a High Court as Presiding/Third Arbitrator. It was submitted that
when the petitioners have nominated a retired Chief Justice of a High Court as
their Arbitrator, the respondent ought to have considered the said fact and
ought to have agreed to nominate a Judge, senior in rank to the Arbitrator
appointed by the petitioners. It was also submitted that the dispute relates to
interpretation of terms and conditions of the contract and there is no
technical element which requires appointment of a technical
man. It was also stated that in similar circumstances, between the same
parties, a dispute had arisen earlier, arbitration petitions were filed before
the Chief Justice of High Court of Delhi and the nominee of the Chief Justice
had appointed Honble Mr. Justice Arun Kumar, retired Judge of this Court
as the Presiding Arbitrator. In the instant case also, such a course ought to
have been adopted by the respondent.
Since
it was not done, the petitioners are constrained to approach this Court.
The
learned counsel for the respondent, on the other hand, submitted that the
relevant clause empowers the Council of Indian Road Congress (IRC for
short) to appoint Presiding Arbitrator in case of failure of the two
Arbitrators to appoint Third Arbitrator. Since two Arbitrators appointed by the
parties (the petitioners on the one hand and the respondent on the other hand)
could not arrive at a consensus, it is the power of IRC to appoint a Third
Arbitrator and the petition is liable to be dismissed. It was also submitted
that a similar question came up for consideration before this Court between the
same parties in YOU ONE Engineering & Construction Co. Ltd. & Anr. v. National
Highways Authority of India, (2006) 4 SCC 372 and this Court has held that it
is the right of IRC to appoint Third Arbitrator and the petitioners could not
insist for a particular Arbitrator.
Regarding
the order passed by the Nominee of the Chief Justice of High Court of Delhi, it
was submitted that it was an agreed order and the respondent had consented to
in appointing Honble Mr. Justice Arun Kumar, retired Judge of this Court
as the Third Arbitrator. The said decision, therefore, does not help the
petitioner. It was also urged that the question is of highly
technical nature and hence IRC is insisting to appoint a
technical man as the Third/Presiding Arbitrator. It was, therefore,
prayed that the petition be dismissed.
Having
considered rival contentions of the parties and having gone through the
Agreement and Arbitration Clause, I am of the view that the prayer of the
petitioners cannot be granted. It is not in dispute that the Agreement, dated May 31, 2001 contains an Arbitration Clause (Clause
3). The relevant part of the said Clause reads thus:
In
case of dispute or difference arising between the employer and a domestic
contractor relating to any matter arising out of or connected with this
Agreement, such dispute or difference shall be settled in accordance with the
Arbitration and Conciliation Act, 1996. The Arbitral Tribunal shall consist of
3 Arbitrators, one each to be appointed by the employer and the contractor. The
third arbitrator shall be chosen by the two arbitrators so appointed by the
parties and shall act as Presiding Arbitrator. In case of the failure of the
two arbitrators appointed by the parties to reach upon a consensus within a
period of 30 days from the appointment of the arbitrator appointed
subsequently, the Presiding Arbitrator shall be appointed by the Council of
Indian Road Congress.
(emphasis
supplied) A bare reading of the above clause leaves no room for doubt that in
case of failure of the two Arbitrators appointed by the parties to reach upon a
consensus, the Presiding Arbitrator shall be appointed by the Council of
IRC.
It may
be stated at this stage that when the matter was placed before me on April 24, 2007, the parties invited my attention
to the aforesaid clause and it was submitted that no consensus could be arrived
at by the parties. Considering the fact situation and the Agreement, I thought
it proper that the parties should undertake fresh exercise in the direction. I
accordingly passed an order to make one more attempt.
Unfortunately,
however, the effort could not succeed and both the counsel stated that the
matter will have to be decided on merits. Accordingly, the matter was heard.
In my
opinion, the learned counsel for the respondent is right that apart from clear
language of Arbitration Clause, the point is also covered by YOU ONE
Engineering. Almost in identical circumstances, this Court was called upon to
consider the provisions of the Act and the right of the respondent to appoint
Presiding Arbitrator under the Agreement. The Court held that it is the right
of IRC to appoint Presiding Arbitrator in case the parties are not ad idem in
appointment of Third/Presiding Arbitrator.
This
Court stated:
The
arbitration agreement clearly envisages the appointment of the presiding
arbitrator by IRC. There is no qualification that the arbitrator has to be a
different person depending on the nature of the dispute. If the parties have
entered into such an agreement with open eyes, it is not open to ignore it and
invoke exercise of powers in Section 11(6).
(emphasis
supplied) It is, no doubt, true that the High Court of Delhi has appointed
Honble Mr. Justice Arun Kumar, retired Judge of this Court as Presiding
Arbitrator in OMP No. 342 of 2004 vide its order dated May 22, 2006. The said order is on record of
this case. Three paragraphs of the said order are important and they read as
under:
3.
Learned counsel for the parties jointly state that whole issue can be sorted
out by having a panel of three arbitrators, with one arbitrator as nominated by
each of the parties and the presiding arbitrator to be appointed by this Court
with the joint consent of the learned counsel for the parties. It may be
noticed that as on date the petitioner has nominated Mr.L.R.Gupta, Director
General Works, CPWD (Retd.) while respondent has nominated Justice S.B.Wad (Retd.).
Justice S.B.Wad was nominated in place of Justice A.K.Srivastava (Retd.), who
expressed his inability to act as an arbitrator.
4.
Learned counsel for the parties propose that Justice Arun Kumar (Retd. Judge of
the Supreme Court), 10, Krishna Menon Marg, New Delhi - 110 001 (Phone :
2301-2175) be appointed as the presiding arbitrator and arbitral tribunal be
constituted accordingly.
5. The
constitution of the presiding arbitrator and arbitral tribunal as proposed by
learned counsel for the parties is accepted by this Court and the said tribunal
shall proceed to enter upon reference and determine the dispute between the
parties. Ordered accordingly. The constitution of the tribunal be Justice Arun
Kumar (Retd.) as the presiding arbitrator, Mr.L.R. Gupta and Justice S.B. Wad (Retd.)
as the two other members of the arbitral tribunal. The fee shall be fixed by
the tribunal itself.
(emphasis
supplied) The learned counsel for the respondent was right when he submitted
that the order was based on consent of the parties. As in the present
case, there is no such consent, the Court has to consider the matter by
interpreting an Arbitration Clause. Clause 3, as observed earlier, is
explicitly clear and there is no ambiguity.
Again,
the controversy is decided by this Court in YOU ONE Engineering. In my view,
therefore, the petitioners cannot compel the respondent to agree for a retired
Judge of this Court or retired Chief Justice of a High Court, senior to
Honble Mr. Justice Mohta as Presiding Arbitrator.
It was
finally submitted that even if this Court is of the view that no such direction
can be issued or order can be passed, it may be appreciated that the
petitioners have chosen a retired Chief Justice of a High Court as their
Arbitrator and appropriate observations may be made so that IRC may appoint
retired Judge of this Court or a retired Chief Justice of a High Court to be
the Presiding Arbitrator. That would enable the petitioners to avail services
of an Arbitrator appointed by them.
I
appreciate the anxiety of the petitioners. In my view, however, when the
Arbitration Clause is clear and the point is concluded by a decision of this
Court, it would not be proper on my part to make any such observation. It is,
however, open to the respondent to take an appropriate decision in the matter
keeping in view the facts in their entirety. I may only state that this
decision will not inhibit the respondent in taking any decision as it thinks
fit.
In
view of the above legal position, I express no opinion on the contention of the
parties as to whether the controversy raised is or is not of a
technical nature.
Since
it is not necessary for me to enter into that question, I leave the matter
there.
For
the foregoing reasons, the application deserves to be dismissed and is
accordingly dismissed, however, leaving the parties to bear their own costs.
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